Markets experiencing bouts of volatility and trading in narrow range after discounting budget event
The markets in the month of January have experienced volatility and closed flat after making a new high of 22124 on nifty and 73425 on sensex on 16th Jan’24. The market was volatile in 2nd half of Jan month and closed flat. The same pattern have continued in Feb’24 so far and is flat on closing basis and trading in the range of 21k and 22k nifty levels. There has been interim budget presentation on 1st feb’24 and market closed flat that day with minimal impact. The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) on 8th Feb’24 kept repo rates unchanged at 6.5% and is focused on the withdrawal of accommodation, Governor Shaktikanta Das said. It projects real GDP growth of 7 percent for FY’25 with risks evenly balanced. There has been a pause in the uptrend with volatility after big rally in 2023. This can be attributed to various factors like FII selling, global markets volatility and evidenced by higher VIX and lower advance decline ratio. Indian market has performed in line with most other markets and comparatively Japan and US has outperformed Indian market. There are still some global geo politics and events to watch out for any surprises.
Budget Highlights
With the upcoming general elections looming, the recently revealed Interim Budget for the fiscal year 2024-25 has diverged from the typical pre-election pattern. Instead of succumbing to populist measures, the budget showcases a professional and forward-looking approach, indicating the government’s confidence in the upcoming elections and the overall economic landscape.
As is the case with all large-scale exercises that encompass and have an impact on the broader population, this budget too brought cheers to some stakeholders while others wished that it could have done a little more for them.
The thrust of the budget has been fiscal consolidation. The overarching objective of the government is to reduce the budget deficit to 5.1 per cent in the fiscal year 2024-25 (FY-25), down from 5.8 per cent in 2023-24 (FY-24). To buoy the overall economic development in the country, the budget features an increased capital expenditure (capex) by a whopping 11 percent. As a result, Rs 11.11 lakh crore will be the capex in FY-25. India’s Budget Highlights 2024 reflect a strategic vision to foster economic growth and social development. The government’s commitment to fiscal prudence, coupled with targeted investments, sets the stage for a dynamic and sustainable economic trajectory.
Outlook for the Indian Market
Markets are volatile and sideways since start of the year and trading in a narrow range though intraday volatility has increased with spike in India VIX. The same volatility has continued across large cap, mid cap and small cap. However small cap has corrected more followed by midcap Vs large cap. Further, the sectoral performance have seen rally in PSU bank, Software, Pharma whereas FMCG, private bank and metals were laggards. Similar performance and volatility may continue this month as well.
Fundamental outlook: The market may remain volatile and continue to trade in narrow range this month as well in line with the last month outlook. The first quarter is generally volatile in terms of past years performance. The key event for the year is the May’2024 central Government Election and till then market seems to have limited upside with minor pullbacks likely in between with volatility. The global events and domestic events need to be tracked closely. Some rebalancing in the portfolio at sectors and market cap level is advised at this stage; SIPs may continue and review it with your investment advisor.
Technical outlook: Indian market is volatile and sideways on basis of technicals for this month. Nifty is currently trading mix on the basis of short term and long term moving averages. The RSI is in range of 50 to 55 which indicates market is directionless and choppy. The immediate target for nifty is 22150 and may face strong resistance at 22500 level. The immediate support for nifty is seen at 21000 and major support at 20450.
